The Morazha Kallissery service Co-op Bank Ltd, Kannur V. The ITO, Kannur

ITA 726/COCH/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81351 (ITAT-COCHIN)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 16-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 08-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: R KRISHNA IYER
• Keywords: Question of law; Bad and doubtful debts
• Section: 27; 6; 56; 28

Judgement Text

ITA NOS. 725 TO 728/COCH/2013 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI N.R.S. GANESAN, JM & CHANDRA POOJARI , AM ITA NO S . 725 TO 728/COCH/2013 (ASST YEAR S 2007 - 08 TO 2010 - 11 ) M/S MORAZHA KALLIASSERY SERVICE CO - OP RURAL BANK LTD ANCHAMPEEDIKA KANNUR 67 0 331 VS THE INCOME TAX OFFICER WARD 1 KANNUR ( APPELLANT) (RESPONDENT) PAN NO. AAAAT9657M ASSESSEE BY SHRI R KRISHNA IYER REVENUE BY SHRI K K JOHN, SR DR DATE OF HEARING 15 TH OCT 2014 DATE OF PRONOUNCEMENT 17 TH OCT 2014 OR D ER PER CHANDRA POOJARI , AM: THESE FOUR APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER OF THE CIT(T(A), KOZHIKODE DATED 30.8.2013 AND IT RELATE TO THE AYS 2007 - 08 TO 2010 - 11. SINCE COMMON ISSUES ARE INVOLVED IN ALL THESE APPEALS; THEREFORE, FOR THE S AKE OF CONVENIENCE, WE HEARD THE APPEALS TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2 THE FIRST COMMON GROUND IN ALL THESE APPEALS RELATES TO DISALLOWANCE OF DEDUCTION U/S 80P OF THE I T ACT. 2. 1 THE BRIEF FACTS OF THE CASES ARE THAT TH E LOWER AUTHORITIES DENIED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 80P OF THE ACT. THE PRIMARY OBJECT OR PRINCIPAL ITA NOS. 725 TO 728/COCH/2013 2 BUSINESS OF THE ASSESSEE IS TO PROVIDE FINANCIAL ACCOMMODATION TO ITS MEMBERS FOR AGRICULTURAL PURPOSES OR FOR THE PURPOSES CONNECTED W ITH AGRICULTURAL ACTIVITIES SO AS TO GRANT DEDUCTION U/S 80P OF THE I T ACT . SINCE THE ASSESSEE PROVIDED ONLY NOMINAL AMOUNT OF LOAN FOR AGRICULTURAL PURPOSES; THE ASSESSEE IS NOT TREATED AS PRIMARY AGRICULTURAL CREDIT SOCIETIES (PACS). T HE ASSESSEE WAS A LSO DOING BANKING BUSINESS AND THE ASSESSEE WAS TREATED AS C O - OPERATIVE BANKS, THE ASSESSEE WAS NOT GRANTED DEDUCTION U/S. 80P OF THE I.T. ACT. ACCORDINGLY, THE AO DISALLOWED THE CLAIM OF THE ASSESSEE. 2.2 ON APPEAL, THE CIT(A) CONFIRMED THE ORDER OF THE AO. AGGRIEVED , THE ASSESSEE IS IN A PPEAL BEFORE US. THE ASSESSEE FILED DETAILED ARGUMENTS CHALLENGING THE ORDERS OF THE LOWER AUTHORITIES AND ALSO WRITTEN SUBMISSION SEEKING RELIEF U/S 80P WHICH IS KEPT ON RECORD. 3 WE HAVE HEARD THE PARTIES AND PE RUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT AN IDENTICAL ISSUE CAME FOR CONSIDERATION BEFORE THIS COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF PINARAYI SERVICE COOP BANK LTD, KANNUR IN ITA NO. 123/COCH/2012 AND OTHERS VIDE ORDER DATED 31.7.2014 AND DISMISSED THE GROUND TAKEN BY THE ASSESSEE WHEREIN IT HAS BEEN HELD AS UNDER: 39 AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT SIMILAR ISSUE CAME FOR CONSIDERATION BEFORE THIS COCHIN BENCH OF THE TRIBUNAL ON THE EARLIER OCCASION IN THE CASE OF KUNNAMANGALAM CO - OPERATIVE BANK IN I.T.A. NO. 156/COCH/2014 VIDE ORDER DATED 25/07/2014 DECIDED THE ISSUE AGAINST THE ASSESSEE. THE RELEVANT PORTION OF THE SAID ORDER IS AS FOLLOWS: 8.10 WE HAVE GONE THROUGH THE DECISION OF THE HYDERABAD BENC H OF THIS TRIBUNAL IN THE CASE OF THE CITIZEN COOPERATIVE SOCIETY VS. ADDL. CIT, 41 305 ITA NOS. 725 TO 728/COCH/2013 3 (HYD). WE NOTICE THAT THIS DECISION IS APPLICABLE TO THE FACTS OF THE CASE BEFORE US. IN THAT DECISION, UNDER PARA 23 THE TRIBUNAL HAS GIVEN A FINDING THAT THE ASSESSEE IS CARRYING ON BANKING BUSINESS AND FOR ALL PRACTICAL PURPOSES IT ACTS LIKE A CO - OPERATIVE BANK. THE SOCIETY IS GOVERNED BY THE BANKING REGULATIONS ACT. THEREFORE, THE SOCIETY BEING A CO - OPERATIVE BANK PROVIDING BANKING FACILITIES TO MEMBERS IS NOT ELIGIB LE TO CLAIM DEDUCTION U/S 80P(2)(A)(I) AFTER THE INTRODUCTION OF SUB - SECTION (4) TO SECTION 80P. IN VIEW OF THIS FINDING, THE ASSESSEE WAS DENIED DEDUCTION U/S 80P(2)(A)(I). WE HAVE ALSO GONE THROUGH THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN T HE CASE OF ITO VS. DIVYAJYOTHI CREDIT CO - OPERATIVE SOCIETY LTD. (SUPRA) IN ITA NO. 72/BANG/2013. IN THIS CASE, WE NOTICE THAT THE HON'BLE TRIBUNAL CONFIRMED THE ORDER OF CIT(A) FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF ACIT, CIRCLE 3(1), BANGAL ORE VS. M/S. BANGALORE COMMERCIAL TRANSPORT CREDIT CO - OPERATIVE SOCIETY LTD. IN ITA NO. 1069/BANG/2010 HOLDING THAT SEC. 80P(2)(A)(I) IS APPLICABLE ONLY TO A CO - OPERATIVE BANK AND NOT TO CREDIT CO - OPERATIVE SOCIETY. WITH DUE REGARDS TO THE BENCH, WE ARE UN ABLE TO FIND ANY TERMCREDIT CO - OPERATIVE SOCIETY U/S 80P(2)(A)(I) OR U/S 80P(4), THEREFORE, THIS DECISION CANNOT ASSIST US. WE NOTED THAT THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CITVS. JAFARI MOMIN VIKAS CO - OP. CREDIT SOCIETY LTD. IN TAX APPEALS NO 442 OF 2013, 443 OF 2013 AND 863 OF 2013 (SUPRA) VIDE ORDER DT. 15.1.2014 TOOK THE VIEW THAT SEC. 80P(4) WILL NOT APPLY TO A SOCIETY WHICH IS NOT A CO - OPERATIVE BANK. IN THE CASE OF VYAVASAYA SEVA SAHAKARA SANGHA VS. STATE OF KARNATAKA &ORS. (SUPRA) WE NO TICE THAT THE ISSUE BEFORE THE HON'BLE HIGH COURT IN THE WRIT PETITION FILED BY THE PETITIONER RELATED TO THE LEGISLATIVE COMPETENCE OF THE STATE LEGISLATURE FOR ISSUING A CIRCULAR. THE ISSUE DOES NOT RELATE TO THE CLAIM OF DEDUCTION U/S 80P(2)(A)(I). WHI LE DEALING WITH THIS ISSUE, THE HON'BLE HIGH COURT UNDER PARA 12 OBSERVED AS UNDER : 12. IT IS NOT POSSIBLE TO ACCEPT THIS CONTENTION. THE PETITIONERS ARE NOT THE BANKING INSTITUTIONS COMING UNDER THE PURVIEW OF THE BANKING REGULATION ACT. THEY ARE THE C O - OPERATIVE SOCIETIES REGISTERED UNDER THE ACT, AND AS SUCH THEY ARE GOVERNED BY THE PROVISIONS OF THE ACT PASSED BY THE STATE LEGISLATURE. CONSEQUENTLY, THE STATE GOVERNMENT HAS CONTROL OVER THEM TO THE EXTENT THE ACT PERMITS. MAJOR ACTIVITIES OF THE PETI TIONERS ARE TO FINANCE ITS MEMBERS. FOR THE PURPOSE OF FINANCING ITS MEMBERS, THEY BORROW MONEY FROM THE FINANCING AGENCIES AND REPAY THE SAME. MERELY BECAUSE THE PETITIONERS - THE CO - OPERATIVE SOCIETIES IN QUESTION - ARE REQUIRED TO ADVANCE LOANS TO THEIR MEM BERS, THEY DO NOT CEASE TO BE CO - OPERATIVE SOCIETIES GOVERNED BY THE ACT NOR CAN THEY BE TREATED AS BANKING COMPANIES. IT IS ALSO NOT POSSIBLE TO HOLD THAT THESE ACTIVITIES OF THE PETITIONERS AMOUNT TO BANKING AS CONTEMPLATED UNDER THE BANKING ITA NOS. 725 TO 728/COCH/2013 4 REGULATION ACT, 1949, INASMUCH AS THESE CO - OPERATIVE SOCIETIES ARE NOT ESTABLISHED FOR THE PURPOSE OF DOING BANKING AS DEFINED IN SECTION 5(B) OF THE BANKING REGULATION ACT, 1949. THIS DECISION, IN OUR OPINION, IS NOT APPLICABLE TO THE CASE BEFORE US BECAUSE THE PROVISIONS OF SEC. 80P(2)(A)(I), AS WE HAVE ALREADY HELD IN THE PRECEDING PARAGRAPHS, ARE APPLICABLE TO A CO - OPERATIVE SOCIETY WHICH IS ENGAGED IN CARRYING ON BANKING BUSINESS FACILITIES TO ITS MEMBERS IF IT IS NOT A CO - OPERATIVE BANK. WE HAVE ALSO GONE T HROUGH THE DECISION OF THIS BENCH IN THE CASE OF DCIT VS. JAYALAKSHMI MAHILA VIVIDODESHAGALA SOUHARDA SAHAKARI LTD. IN ITA NO. 1 TO 3/PNJ/2012 DT. 30.3.2012 (SUPRA). WHILE DISCUSSING THIS ISSUE, AFTER ANALYSING THE AIMS AND OBJECTS OF THE CO - OPERATIVE SOC IETY UNDER PARA 12 OF ITS ORDER, THIS TRIBUNAL HAS HELD AS UNDER: 12.FROM THE AFORESAID OBJECTS, IT IS APPARENT THAT NONE OF THE AIMS AND OBJECTS ALLOWS THE ASSESSEE COOPERATIVE SOCIETY TO ACCEPT DEPOSITS OF MONEY FROM PUBLIC FOR THE PURPOSE OF LENDING OR INVESTMENT. IN OUR OPINION UNTIL AND UNLESS THAT CONDITION IS SATISFIED, IT CANNOT BE SAID THAT THE PRIME OBJECT OR PRINCIPAL BUSINESS OF THE ASSESSEE IS BANKING BUSINESS. THEREFORE, THE ASSESSEE WILL NOT COMPLY WITH THE FIRST CONDITION AS LAID DOWN IN THE DEFINITION AS GIVEN U/S. 5(CCV) OF THE BANKING REGULATION ACT, 1959 FOR BECOMING PRIMARY COOPERATIVE BANK. THE ASSESSEE, THEREFORE, CANNOT BE REGARDED TO BE PRIMARY COOPERATIVE BANK AND IN CONSEQUENCE THEREOF, IT CANNOT BE A CO - OPERATIVE BANK AS DEFI NED UNDER PART V OF THE BANKING REGULATION ACT 1949. ACCORDINGLY, IN OUR OPINION THE PROVISIONS OF SECTION 80P (4) READ WITH EXPLANATION THERE UNDER WILL NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE. THE ASSESSEE, THEREFORE, IN OUR OPINION WILL BE ENTITLE D FOR THE DEDUCTION U/S 80P(2)(A)(I). WE ACCORDINGLY CONFIRM THE ORDER OF CIT(A) ALLOWING DEDUCTION TO THE ASSESSEE. THE OTHER DECISIONS ALSO RELIED ON ARE NOT APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. 8.11. IN VIEW OF OUR AFORESAID DISCUSSION, WE HOLD THAT THE ASSESSEE IS A PRIMARY COOPERATIVE BANK AND THEREFORE HIT BY THE PROVISIONS OF SECTION 80P(4). 9. ON THE OTHER HAND, THE ASSESSEE MADE AN ALTERNATIVE PLEA THAT THE ASSESSEE IS LENDING MONEY ONLY TO ITS MEMBERS. BEING SO, APPLYING THE CON CEPT OF MUTUALITY, THE TOTAL INCOME OF THE ASSESSEE HAS TO BE EXEMPT FROM TAX. HOWEVER, ITA NOS. 725 TO 728/COCH/2013 5 WE FIND THAT THIS ARGUMENT OF THE ASSESSEE IS ALSO DEVOID OF MERITS. THE HONBLE SUPREME COURT HAD AN OCCASION TO CONSIDER THIS MUTUALITY CONCEPT. SIMILAR ISSUE CAME UP FOR CONSIDERATION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KUMBAKONAM MUTUAL BENEFIT FUND LTD., 53 ITR 241 (SC) WHEREIN IT WAS HELD THAT IF THE PROFITS ARE DISTRIBUTED TO SHAREHOLDERS AS SHAREHOLDERS, THE PRINCIPLE OF MUTUALITY IS NOT SATISF IED. A SHAREHOLDER IN THE ASSESSEE - COMPANY IS ENTITLED TO PARTICIPATE IN THE PROFITS WITHOUT CONTRIBUTING TO THE FUNDS OF THE COMPANY BY TAKING LOANS. HE IS ENTITLED TO RECEIVE DIVIDEND AS LONG AS HE HELD SHARES. HE DID NOT HAVE TO FULFIL ANY OTHER CONDI TION. HIS POSITION IS IN NO WAY DIFFERENT FROM A SHAREHOLDER IN A BANKING COMPANY, LIMITED BY SHARES. INDEED, THE POSITION OF THE ASSESSEE IS NO DIFFERENT FROM AN ORDINARY BANK EXCEPT THAT IT LENDS MONEY AND RECEIVES DIVIDEND FROM ITS SHAREHOLDERS WHICH DOES NOT BY ITSELF MAKE ITS INCOME ANY THE LESS INCOME FROM BUSINESS. THE SAME JUDGMENT WAS FOLLOWED IN THE CASE OF CIT VS. ARCOT DHANASEKHARA NIDHI LTD., 59 ITR 480 (MAD.), CIT VS. DHARMAVARAM MUTUAL BENEFIT PERMANENT FUND LTD., 67 ITR 673 (AP) AND CIT VS. BHAVNAGAR TRUST CORPORATION (P) LTD., 69 ITR 278. FURTHER, THE HONBLE KERALA HIGH COURT IN THE CASE OF KOTTAYAM CO - OPERATIVE LAND MORTGAGE BANK LTD. VS. CIT, 172 ITR 443(KER.) WHERE IT WAS HELD AS UNDER: THE INCOME - TAX OFFICER HELD THE VIEW THAT TH E ASSESSEE IS NOT ENTITLED TO CLAIM ANY FURTHER EXEMPTION UNDER CLAUSE (C) AS THE ASSESSEE IS ENTITLED TO EXEMPTION U/S. CLAUSE (A) IN RESPECT OF THE BANKING ACTIVITIES. THE APPELLATE ASSISTANT COMMISSIONER, IN ALLOWING THE ASSESSEES APPEAL, HELD THAT EXE MPTION UNDER CLAUSE (C) IS IN ADDITION TO THE EXEMPTION ALLOWABLE UNDER CLAUSES (A) AND (B) AND DIRECTED THE INCOME - TAX OFFICER TO ALLOW A DEDUCTION OF RS. 20,000 SEPARATELY, TAKING INTO CONSIDERATION THE PROPERTY INCOME EARNED BY THE ASSESSEE. THE REVENU E CARRIED THE MATTER IN APPEAL BEFORE THE APPELLATE TRIBUNAL. THE TRIBUNAL HELD THAT THE RULE OF CONSTRUCTION OF EJUSDEM GENERIS APPLIES TO THE CONSTRUCTION OF CLAUSE (C), WHICH RESULTS IN PROFITS AND GAINS, THAT THE INCOME FROM HOUSE PROPERTY HAS BEEN DE ALT WITH IN SECTIONS 22 TO 27 AS INCOME AND NOT AS PROFITS AND GAINS AND THAT THE ASSESSEE IS NOT, THEREFORE, ENTITLED TO ANY EXEMPTION UNDER CLAUSE (C). THE TRIBUNAL DID NOT ACCEPT THE ALTERNATIVE CONTENTION RAISED BY THE ASSESSEE FOR THE FIRST TIME BEFOR E THE TRIBUNAL THAT THE LETTING OUT OF SURPLUS SPACE SHOULD BE TREATED AS A BUSINESS ACTIVITY UNDER CLAUSE (A) OF SUB - SECTION (2) OF SECTION 80P OF THE ACT. THE APPEALS WERE ACCORDINGLY ALLOWED. THE QUESTION OF LAW ARISES OUT OF THE ORDER OF THE TRIBUNAL. ITA NOS. 725 TO 728/COCH/2013 6 SECTION 80P OF THE INCOME - TAX ACT, 1961, ALLOWS A STRAIGHT DEDUCTION, IN THE COMPUTATION OF THE TOTAL INCOME OF A CO - OPERATIVE SOCIETY, TO THE EXTENT MENTIONED. CLAUSE(C) OF SECTION 80P(2) PROVIDES THAT IN THE CASE OF A CO - OPERATIVE SOCIETY ENGAGED I N ACTIVITIES OTHER THAN THOSE SPECIFIED IN CLAUSE (A) OR CLAUSE (B) EITHER INDEPENDENTLY OF, OR IN ADDITION TO, ALL OR ANY OF THE ACTIVITIES SO SPECIFIED, SO MUCH OF ITS PROFITS AND GAINS ATTRIBUTABLE TO SUCH ACTIVITIES AS DOES NOT EXCEED RS. 20,000 SHALL BE DEDUCTED IN COMPUTING THE TOTAL INCOME. THE CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS FALLS UNDER CLAUSE (A) OF SECTION 80P(2). THE CLAIM FOR EXEMPTION UNDER CLAUSE (C) IS IN ADDI TION TO THE EXEMPTION PROVIDED UNDER CLAUSE (A). THE PROVISIONS ARE CUMULATIVE AND MUTUALLY SUPPLEMENTING. THE LIMITS SPECIFIED IN CLAUSE(C) ARE IN RELATION TO THE PROFITS AND GAINS ATTRIBUTABLE TO THE ACTIVITY OTHER THAN THAT SPECIFIED IN CLAUSE (A). IF THE RENTAL INCOME RECEIVED BY THE SOCIETY IS ATTRIBUTABLE TO ANY ACTIVITY OF THE SOCIETY, CLAUSE (C) WOULD BE ATTRACTED. IT IS THEN NECESSARY THAT THE CO - OPERATIVE SOCIETY MUST PROVE THAT IT HAS ENGAGED ITSELF IN CARRYING ON THE ACTIVITY GIVING RISE TO P ROFITS OR GAINS. SUCH ACTIVITY OF THE ASSESSEE MUST HAVE A DIRECT OR PROXIMATE CONNECTION WITH OR NEXUS TO THE EARNING IN ORDER THAT THE ASSESSEE MAY ENJOY THE EXEMPTION. SECTION 80P(2)(C) OF THE ACT EXEMPTS INCOME OF CO - OPERATIVE SOCIETIES TO THE EXTEN T MENTIONED THEREIN IF THE PROFITS OR GAINS ARE ATTRIBUTABLE TO THE ACTIVITY IN WHICH THE CO - OPERATIVE SOCIETY IS ENGAGED. THE EXPRESSION ATTRIBUTABLE TO IS MUCH WIDER THAN THE EXPRESSION DERIVED FROM AND IT COVERS RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS OF THE ASSESSEE. IN THIS VIEW OF THE MATTER, INTEREST EARNED BY A CO - OPERATIVE SOCIETY, WHICH WAS CARRYING ON THE BUSINESS OF SUPPLYING SURGARCANE ON STATUTORY INVESTMENT IN GOVERNMENT SECURITIES, WAS HELD PROFIT ATTRIBUTAB LE TO THE CARRYING ON OF THE ACTIVITY OF SUPPLYING SUGARCANE (CIT VS. CO - OPERATIVE CANE DEVELOPMENT UNION LTD. (1979) 118 ITR 770 (ALL.) THE PROFITS AND GAINS FROM SUCH INVESTMENTS WERE CONNECTED WITH OR INCIDENTAL TO THE CARRYING ON OF THE ACTUAL BUSINESS . WHERE, HOWEVER, THE ASSESSEE AS OWNER OF CERTAIN PROPERTY LETS OUT THAT PROPERTY AND RECEIVES RENTAL INCOME, THE INCOME THUS RECEIVED CANNOT PARTAKE OF THE CHARACTER OF PROFITS AND GAINS ATTRIBUTABLE TO AN ACTIVITY CARRIED ON BY THE SOCIETY. THE BUILD ING LET OUT IS NOT A COMMERCIAL ASSET OR THE RENT RECEIVED IS NOT PROFIT OR GAIN ARISING FROM THE EXPLOITATION OF A BUSINESS ASSET. THE WORD ACTIVITY IS WIDER THAN THE WORD BUSINESS. IT CONNOTES A SPECIFIED FORM OF SUPERVISED ACTION OR 0FIELD OF ACTIO N. READ IN THE CONTEXT OF THE PROFIT EARNING ACTIVITY OF A ITA NOS. 725 TO 728/COCH/2013 7 CO - OPERATIVE SOCIETY, IT MEANS THE CORPORATE ACTIVITY OF THE SOCIETY, THAT IS TO SAY, WHETHER OR NOT THEY AMOUNT TO A BUSINESS, TRADE OR PROFESSION IN THE ORDINARY SENSE. CLAUSE (C) OF SECTION 80P (2) IS INTENDED TO COVER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS BUT ATTRIBUTABLE TO AN ACTIVITY WHICH RESULTS IN PROFITS AND GAINS. LETTING OUT OF SURPLUS SPACE IN THE BUILDING OWNED AND USED BY THE ASSESSEE IS NOT SUCH AN ACT IVITY FALLING UNDER CLAUSE (C). THE RENT THUS RECEIVED BY THE ASSESSEE IS NOT ELIGIBLE FOR THE EXEMPTION PROVIDED THEREUNDER. IN THIS VIEW, THE APPELLATE TRIBUNAL WAS JUSTIFIED IN REJECTING THE ASSESSEES CLAIM. 10. IN VIEW OF THE ABOVE DISCUSSIONS, WE ARE INCLINED TO HOLD THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S. 80P OF THE ACT ON ANY REASONING. 4 FOLLOWING THE ORDER OF THIS TRIBUNAL IN THE CASE OF PINARAYI SERVICE COOP BANK LTD, CITED SUPRA , WE ARE INCLINED TO DISMISS THIS GROUND OF THE AS SESSEE IN ALL THE APPEALS. 5 NEXT COMMON GROUND RELATES TO DISALLOWANCE OF INTEREST PAID WITHOUT DEDUCTING TAX TO NON MEMBERS U/S. 40(A)(IA) OF THE ACT. 6 WE HAVE HEARD THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT AN IDENTIC AL ISSUE CAME FOR CONSIDERATION BEFORE THIS COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF PINARAYI SERVICE COOP BANK LTD, KANNUR IN ITA NO. 123/COCH/2012 AND OTHERS VIDE ORDER DATED 31.7.2014 AND DISMISSED THE GROUND TAKEN BY THE ASSESSEE WHEREIN IT HAS BEE N HELD AS UNDER: 42.1 WE HAVE HEARD BOTH THE PARTIES. WE FIND A SIMILAR ISSUE CAME UP FOR CONSIDERATION OF THE COCHIN BENCH OF TRIBUNAL IN THE CASE OF KARIVELLOOR SERVICE CO - OPERATIVE BANK LTD. VS. ITO IN I.T.A. NO. 311/COCH/2012 VIDE ORDER DATED 22 - 03 - 2013 WHEREIN IT WAS HELD AS UNDER: ITA NOS. 725 TO 728/COCH/2013 8 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE CASE OF KADACHIRA SERVICE CO - OPERATIVE BANK LTD. (SUPRA), THIS TRIBUNAL FOUND THAT THE TAXPAYERS W ERE NOT CARRYING ON ANY BANKING ACTIVITY AND, THEREFORE, THEY ARE AGRICULTURAL CO - OPERATIVE SOCIETIES. IN VIEW OF THE SPECIFIC PROVISIONS EXEMPTING THE AGRICULTURAL CO - OPERATIVE SOCIETIES FROM DEDUCTION OF TAX IN RESPECT OF AGRICULTURAL CO - OPERATIVE SOCIE TIES THIS TRIBUNAL FOUND THAT SECTION 194A(3)(VIIA) IS NOT APPLICABLE TO AGRICULTURAL CO - OPERATIVE SOCIETIES. IN THIS CASE, IT APPEARS THAT THE TAXPAYER WAS ACCEPTING DEPOSITS AND MAINTAINING SAVINGS BANK ACCOUNT AND CURRENT BANK ACCOUNT. THE TAXPAYER IS PROVIDING CHEQUE FACILITIES TO ITS CUSTOMERS. APART FROM THIS, THE TAXPAYER IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF CEMENT, HARDWARE, MEDICINE AND HOME APPLIANCES. THE LOAN APPEARS TO HAVE BEEN GIVEN ON PLEDGING OF GOLD JEWELLERY AND MORTGAGE OF LAND. IN VIEW OF THE ADMITTED FACT THAT THE TAXPAYER IS MAINTAINING SAVINGS ACCOUNT, CURRENT ACCOUNT AND PROVIDING CHEQUE FACILITY TO ITS CUSTOMERS, IT IS OBVIOUS THAT THE TAXPAYER IS ENGAGED ITSELF IN THE BUSINESS OF BANKING APART FROM OTHER TRADING ACTIVITIES. EXEMPTION U/S. 194A(3)(VIIA) IS APPLICABLE ONLY IN RESPECT OF AGRICULTURAL COOPERATIVE SOCIETIES. THE AGRICULTURAL CO - OPERATIVE BANKS ARE BOUND TO DEDUCT TAX. IN THIS CASE, ADMITTEDLY, THE TAX PAYER IS ENGAGED IN THE BANKING ACTIVITY AND MAIN TAINING SAVINGS BANK ACCOUNT, CURRENT ACCOUNT AND PROVIDING CHEQUE FACILITY TO ITS CUSTOMERS. THEREFORE, THE TAXPAYER IS BOUND TO DEDUCT TAX IN RESPECT OF INTEREST ON THE DEPOSITS. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DECISION IN THE CASE OF KADACHIRA SERVICE CO - OPERATIVE BANK LTD.(SUPRA) MAY NOT BE APPLICABLE TO THE FACTS OF THE PRESENT CASE. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE CONFIRMED. 42.2. BEING SO, THIS ISSUE IS IDENTICAL AND THE FACTS ARE ALSO SIMILAR TO THE ONE CONSIDERED BY THIS BENCH OF THE TRIBUNAL IN THE EARLIER OCCASION, WE ARE INCLINED TO DECIDED THE ISSUE AGAINST THE ASSESSEE. THIS GROUND IN ALL THE ASSESSEES APPEALS IS DISMISSED. 7 THEREFORE, F OLLOWING THE ORDER OF THIS TRIBUNAL IN THE CASE OF PINARAYI SERVICE COOP BANK LTD, CITED SUPRA , WE ARE INCLINED TO DISMISS THIS GROUND OF THE ASSESSEE IN ALL THE APPEALS. 8 NEXT COMMON GROUND IS AGAINST RESTRICTING THE BAD A N D DOUBTFUL DEBTS U/S 36(1)(VIIA) OF THE I T ACT BY INVOKING THE RATIO LAID DO WN BY THE HONBLE HIGH COURT OF KERALA IN THE CASE OF LORD KRISHNA BANK LTD REPORTED IN 339 ITR 606 . ITA NOS. 725 TO 728/COCH/2013 9 9 WE HAVE HEARD THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT AN IDENTICAL ISSUE CAME FOR CONSIDERATION BEFORE THIS COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF PINARAYI SERVICE COOP BANK LTD, KANNUR IN ITA NO. 123/COCH/2012 AND OTHERS VIDE ORDER DATED 31.7.2014 AND DISMISSED THE GROUND TAKEN BY THE ASSESSEE. THE FINDINGS OF THE TRIBUNAL IN THE CASE OF PINARAYI SERVICE COOP BANK LT D CITED SUPRA READ AS UNDER: 41.1 AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT SIMILAR ISSUE CAME UP FOR CONSIDERATION IN THE CASE OF KANNUR CO - OPERATIVE BANK LTD. IN I.T.A. NOS. 182&183/COCH/2014 DATED 27/06/2014 WHEREIN THE TRIBUNAL HELD A S UNDER: 3. THE ASSESSEE RAISED THE GROUND IN BOTH THE APPEALS THAT THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION OF 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY ITS RURAL BRANCHES U/S. 36(1)(VIIA) OF THE I.T. ACT. 4. AF TER HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE IN I.T.A. NOS. 179/2012, 33,37,238,241,243,254&258 OF 2013 VIDE ITS JUDGMENT DATED 3RD APRIL, 201 4. THE HONBLE JURISDICTIONAL HIGH COURT HELD AS UNDER: 8. SECTION 36 OF THE ACT DEALS WITH VARIOUS DEDUCTIONS THAT COULD BE ALLOWED IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THE ACT. SECTION 36 HAS VARIOUS CLAUSES AND EACH CLAUSE REFERS TO D EDUCTION ALLOWABLE TO A PARTICULAR ASSESSEE LIKE AMOUNT OF PREMIUM PAID IN RESPECT OF INSURANCE AGAINST RISK OF DAMAGES, FEDERAL MILK CO - OPERATIVE SOCIETY, GENERAL INSURANCE ETC. WE ARE CONCERNED WITH SUB - CLAUSE (A) OF CLAUSE (VIIA) TO SECTION 36(1). THIS CLAUSE MAKES PROVISION FOR BAD AND DOUBTFUL DEBTS. IN OTHER WORDS, DEDUCTION COULD BE CLAIMED BY BANKS REFERRED TO IN CLAUSE (VIIA) IN RESPECT OF BAD AND DOUBTFUL DEBTS. IT PROVIDES CERTAIN TERMS AND CONDITIONS UNDER WHICH SUCH DEDUCTIONS COULD BE CLAIM ED BY A PARTICULAR BANK. SECTION 36(1)(VIIA) COMMENCES WITH FOLLOWING WORDS IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBT MADE BY AND SUB - CLAUSE (A) READS AS UNDER: A SCHEDULED BANK NOT BEING A BANK APPROVED BY CENTRAL GOVERNMENT FOR THE PURPOS ES OF CLAUSE (VIIIA) OR A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA OR A NON - SCHEDULED BANK OR A CO - OPERATIVE BANK OTHER THAN A BANK OR A CO - OPERATIVE BANK OTHER THAN A PRIMARY ITA NOS. 725 TO 728/COCH/2013 10 AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE A GRICULTURAL AND RURAL DEVELOPMENT BANK, AN AMOUNT NOT EXCEEDING SEVEN AND ONE - HALF PERCENT OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING TEN PERCENT OF THE AGGREGATE AVERAGE ADVANCE S MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER. UNDER EXPLANATION TO SECTION 36 FOR BETTER UNDERSTANDING OF CERTAIN TERMS USED IN SUB - CLAUSE (A) OF CLAUSE (VIIA) DEFINITIONS ARE PROVIDED. FOR THE PURPOSE OF THE ABOVE APPEALS, WE NEED TO KNOW WHAT EXACTLY NON - SCHEDULED BANK, RURAL BRANCH CO - OPERATIVE BANK AND SCHEDULED BANK MEAN AS PER THE EXPLANATION WHICH READ AS UNDER: NON - SCHEDULED BANK MEANS A BANKING COMPANY AS DEFINED UNDER CLAUSE (C) OF SECTION 5 OF THE BANKING REGULA TION ACT, 1949, WHICH IS NOT A SCHEDULED BANK. RURAL BRANCH MEANS A BRANCH OF A SCHEDULED BANK OR A NON - SCHEDULED BANK SITUATED IN A PLACE WHICH HAS A POPULATION OF NOR MORE THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR. CO - OPERATIVE BANK, PRIMARY AGRICULTURAL CREDIT SOCIETY AND PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN TH E EXPLANATION TO SUB - SECTION (4) OF SECTION 80P. SCHEDULED BANK MEANS A BANK FOR THE TIME BEING INCLUDED IN THE SECOND SCHEDULE TO THE RESERVE BANK OF INDIA ACT. IN ORDER TO UNDERSTAND WHAT IS A BANKING COMPANY, ONE HAS TO REFER TO BANKING REGULATION AC T AND TO UNDERSTAND WHETHER A PARTICULAR BANK IS A SCHEDULED BANK, ONE HAS TO SEE WHETHER SUCH BANK FINDS A PLACE IN THE SECOND SCHEDULE TO RESERVE BANK OF INDIA ACT. CO - OPERATIVE BANK MEANS A BANK AS EXPLAINED UNDER SUB - SECTION (4) OF SECTION 80P OF THE ACT. SECTION 5(C) OF BANKING REGULATION ACT DEFINES BANKING COMPANY AS UNDER: BANKING COMPANY MEANS ANY COMPANY WHICH TRANSACTS THE BUSINESS OF BANKING IN INDIA. U/S. 80P, IT AGAIN REFERS TO SECTION 56 OF BANKING REGULATION ACT. U/S. 56, FALLING UNDER CHAPTER V OF BANKING REGULATION ACT, ENTIRE PROVISIONS DEAL WITH CO - OPERATIVE SOCIETIES. SECTION 56 SAYS, AFTER CLAUSE (CC) CLAUSE (CCI), DEFINITION OF CO - OPERATIVE BANK, IS TO BE INCLUDED. SECTION 56(C) OF BANKING REGULATION ACT SAYS: IN SECTION 5: - ITA NOS. 725 TO 728/COCH/2013 11 (I) AFTER CLAUSE (CC), THE FOLLOWING CLAUSE SHALL BE INSERTED, NAMELY: - (CCI) CO - OPERATIVE BANK MEANS A STATE CO - OPERATIVE BANK, A CENTRAL CO - OPERATIVE BANK AND A PRIMARY CO - OPERATIVE BANK. MEANING OF DIFFERENT TERMS USEFUL FOR THE PURPOSE OF DE CIDING THE CONTROVERSY, ONE HAS TO SEE HOW PRESENCE OF A PARTICULAR TERM IN A PARTICULAR PROVISION AND SIMULTANEOUSLY BEING ABSENT IN THE EXPLANATION TO THE SAID PROVISION WOULD CHANGE THE POSITION OF THE APPELLATE BANKS WITH REFERENCE TO THE CONTEXT. 9. ADMITTEDLY, APPELLANTS/ASSESSEES ARE CO - OPERATIVE BANKS. WITH INTRODUCTION OF FINANCE ACT OF 2007, COMING INTO EFFECT FROM 01.04.2007, ONE HAS TO UNDERSTAND WHAT WAS THE POSITION PRIOR TO 01.04.2007 AND AFTER 01.04.2007, THEY WERE ENJOYING THE BENEFITS PR OVIDED U/S. 80P. WITH THE INTRODUCTION OF FINANCE ACT 2007 WITH EFFECT FROM 01.04.2007, THEY COULD CLAIM DEDUCTIONS AS PROVIDED U/S. 36(1) OF THE ACT. WE ARE CONCERNED WITH SUB - CLAUSE(A) OF CLAUSE (VIIA) TO SECTION 36(1). PRIOR TO FINANCE ACT OF 2007, CO - OPERATIVE BANK WAS NOT INCLUDED IN SUB - CLAUSE (A) SO FAR AS PROVISIONS FOR BAD AND DOUBTFUL DEBTS. WITH EFFECT FROM 01.04.2007, CO - OPERATIVE BANK WAS INCLUDED UNDER SUB - CLAUSE (A) OF CLAUSE (VIIA) OF SECTION 36(1). IT IS FURTHER CLARIFIED THAT ONLY SUCH CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURE CREDIT SOCIETY, ETC. IS INCLUDED IN SUB - CLAUSE (A) OF CLAUSE (VIIA). THE PROVISION IS A BENEFICIAL ONE. NO DOUBT, PLAIN READING OF MAIN SECTION 36(1) (VIIA)(A) AND EXPLANATION UNDER SAID SECTION PRESENT CERTAIN DIFFICULTIES, BUT SITUATION IS NOT WITHOUT POSSIBILITIES. THE OBJECT AND INTENTION OF THE LEGISLATURE IS TO BE UNDERSTOOD BY HARMONIOUS CONSTRUCTION OF THE PROVISIONS. THE POLICY WAS TO INCLUDE CO - OPERATIVE BANKS AS WELL, AS THEY COULD NOT TAKE S HELTER U/S. 80P OF THE INCOME TAX ACT ANY MORE. BY RESTRICTING THE SCOPE OF THE PROVISIONS, THE VERY PURPOSE OF INCLUSION OF CO - OPERATIVE BANK WOULD BE LOST. SUB - CLAUSE 9A) CONSISTS OF TWO TYPES OF DEDUCTIONS. ONE REFERS TO DEDUCTION OF AN AMOUNT NOT EX CEEDING 7.5% OF THE TOTAL INCOME. ONLY CONDITION IS, THERE SHOULD BE A PROVISION FOR BAD AND DOUBTFUL DEBTS. TILL 01.04.2007, THERE WAS NO NEED TO MAKE ANY PROVISION FOR BAD AND DOUBTFUL DEBTS UNDER THIS CLAUSE SO FAR AS CO - OPERATIVE BANK AND THEY WERE C LAIMING BENEFITS APPLICABLE TO THEM U/S. 80P. DURING THE ASSESSMENT YEAR IN QUESTION THEY CLAIMED DEDUCTIONS U/S. 36(1)(VIIA)(A) OF THE ACT. ONLY WITH REFERENCE TO THE ASSESSMENT YEAR IN QUESTION APPELLANTS/ASSESSEES HAVE CREATED PROVISION FOR BAD AND DO UBTFUL DEBTS IN THE BOOKS OF ACCOUNTS. SO FAR AS THIS ISSUE IS CONCERNED, OPINION OF THE ASSESSING OFFICER AND TWO APPELLATE AUTHORITIES IS JUSTIFIED AND WE NEED NOT INTERFERE WITH THE OPINION OF THE AUTHORITIES IN RESTRICTING DEDUCTIONS ONLY TO 7.5% OF THE TOTAL INCOME AS PROVIDED UNDER SUB - CLAUSE (VIIA) OF SECTION 36(1). 10. THEN COMING TO THE OTHER CONTROVERSIAL ISSUE WHETHER A CO - OPERATIVE BANK, IRRESPECTIVE OF HAVING RURAL BRANCH AS EXPLAINED UNDER EXPLANATION, IS ENTITLED TO HAVE THE BENEFIT OF SECO ND PART OF SECTION 36(1)(VIIA)(A), WE HAVE TO SEE, IN THE ABSENCE OF CO - OPERATIVE BANK IN THE DEFINITION OF RURAL BRANCH UNDER EXPLANATION TO SECTION 36(1) WOULD IT MAKE ANY DIFFERENCE. LEARNED COUNSEL APPEARING FOR APPELLANTS TRIED TO CONVINCE THE COURT THAT ADJECTIVE OF RURAL WOULD MEAN IN RELATION TO OR CHARACTERISTIC OF THE COUNTRYSIDE RATHER THAN THE ITA NOS. 725 TO 728/COCH/2013 12 TOWN; REMOTE RURAL AREAS. URBAN, NO DOUBT, IS OPPOSITE TO RURAL. URBAN IS IN RELATION TO OR CHARACTERISTIC OF A TOWN OR CITY. 11. ACCORDING TO US, THER E IS NO NECESSITY TO FIND OUT THE GENERIC MEANING OF EITHER URBAN OR RURAL FOR THE SIMPLE REASON THAT EXPLANATION UNDER SECTION 36(1) ITSELF DEFINES WHAT COULD BE CONSIDERED AS A RURAL BRANCH SO FAR AS SECTION 36(1) OF THE ACT. IN THE LIGHT OF GIVING A PA RTICULAR DEFINITION FOR THE PURPOSE OF UNDERSTANDING RURAL BRANCH WITH REFERENCE TO SUB - CLAUSE (A) OF CLAUSE (VIIA) TO SECTION 36(1) ONE NEED NOT TO GO IN SEARCH OF THE MEANING OF RURAL OR WHAT EXACTLY WOULD CONSTITUTE RURAL BRANCH. THIS COURT HAD AN OCCA SION TO DECIDE THE SAID CONTROVERSY PERTAINING TO BAD AND DOUBTFUL DEBTS OF A RURAL BRANCH. WHILE EXPLAINING THE MEANING OF PLACE IN EXPLANATION (IA) TO SECTION 36(1)(VIIA), THEIR LORDSHIPS OPINED AS UNDER: NEXT QUESTION RAISED PERTAINS TO THE ASSESSE ES CLAIM FOR DEDUCTION OF PROVISION FOR BAD DEBTS IN TERMS OF SECTION 36(1) (VIIA) OF THE INCOME - TAX ACT. HERE THE ONLY QUESTION RAISED IS AS TO BASIS OF CLASSIFYING BRANCHES OF THE BANK AS RURAL BRANCHES AND OTHER BRANCHES. RURAL BRANCH IS DEFINED UND ER EXPLANATION (IA) TO SECTION 36(1)(VIIA) AS FOLLOWS: RURAL BRANCH MEANS A BRANCH OF A SCHEDULED BANK OR A NON - SCHEDULES BANK SITUATED IN A PLACE WHICH HAS A POPULATION OF NOR MORE THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR.. WHAT IS CLEAR FROM THE ABOVE IS THAT THE CLASSIFICATION BETWEEN RURAL AND OTHER BRANCHES OF A BANK IS MADE BASED ON THE POPULATION IN THE PLACE WHERE THE CONCERNED BRANCH IS LOCATED. WHILE THE ASSESSEES CASE THAT FOUND ACCEPTANCE WITH THE TRIBUNAL IS THAT PLACE REFERRED TO IN THE ABOVE DEFINITION CLAUSE IS THE WARD OF A PANCHAYAT OR MUNICIPALITY, THE ASSESSING OFFICER TOOK THE VIEW THAT PLACE CONTAINED IN THE DEFINITION CLAUSE SHOULD MEAN A REVENUE VILLAGE. NO DOUBT, AS SUCH IS NOT DEFINED IN THE DEFINITION CLAUSES AND SO MUCH SO, WE HAVE TO FIND OUT THE SCOPE AND MEANING OF PLACE REFERRED TO IN THE SECTION. STANDING COUNSEL FOR THE DEPARTMENT PRODUCED BEFORE US LAS T PUBLISHED CENSUS REPORT OF 2001. EVEN THOUGH THE PREVIOUS CENSUS REPORT MAY BE THE RELEVANT ONE, WE FEEL THE SCOPE OF PLACE AS REFERRED TO IN THE CENSUS REPORT PRODUCED COULD BE ADOPTED FOR THE PURPOSE OF THIS CASE. WHAT IS WRITTEN IN THE CENSUS REPO RT 2001 IS AS FOLLOWS: THE BASIC UNIT FOR RURAL AREAS IS THE REVENUE VILLAGE WITH DEFINITE SURVEYED BOUNDARIES. THE RURAL AREA IS, HOWEVER, TAKEN AS THE RESIDUAL PORTION EXCLUDING THE URBAN AREA AND FOR THAT NO STRICT DEFINITION IS FOLLOWED. IN OUR VIEW , THE DEFINITION CLAUSE DOES NOT EXCLUDE THE LITERAL MEANING OF RURAL BRANCH WHICH NECESSARILY EXCLUDES URBAN AREAS. IF THE ASSESSEES CASE ACCEPTED BY THE TRIBUNAL THAT POPULATION IN A WARD HAS TO BE RECKONED FOR DECIDING AS TO WHETHER THE LOCATION OF A PANCHAYAT IS IN A RURAL AREA OR NOT IS ACCEPTED, THEN PROBABLY EVEN IN MUNICIPAL AREAS THERE MAY BE WARDS WITH LESS ITA NOS. 725 TO 728/COCH/2013 13 THAN 10000 POPULATION THEREBY ANSWERING THE BRANCH LOCATED IN SUCH MUNICIPAL AREA ALSO AS A RURAL BRANCH. GOING BY THE ORDINARY MEANING OF RURAL BRANCH, WE FEEL ONLY BRANCHES OF THE BANK LOCATED IN RURAL AREAS ARE COVERED. WHEN THE LEGISLATURE ADOPTS POPULATION AS THE BASIS FOR CLASSIFICATION OF RURAL BRANCHES, THAT TOO, WITH REFERENCE TO THE LAST CENSUS REPORT, WE FEEL THE BASIC UNIT AS AVAI LABLE FOR IDENTIFICATION OF RURAL AREA IN THE CENSUS REPORT CAN BE LEGITIMATELY ADOPTED. SO MUCH SO, WE FEEL THE ABOVE MEANING OF RURAL AREA CONTAINED IN THE CENSUS REPORT WHEREIN REVENUE VILLAGE IS TREATED AS A UNIT OF RURAL AREA, CAN BE RIGHTLY ADOPTED. SO MUCH SO, PLACE REFERRED TO IN THE ABOVE DEFINITION CLAUSE FOR THE PURPOSE OF IDENTIFYING THE BRANCH OF A BANK AS A RURAL BRANCH WITH REFERENCE TO ITS LOCATION IS THE REVENUE VILLAGE. THEREFORE, IN OUR VIEW, THE FINDING OF THE TRIBUNAL THAT PLACE REFERRED TO IN THE DEFINITION IS THE WARD OF A LOCAL AUTHORITY LIKE PANCHAYAT OR MUNICIPALITY IS INCORRECT AND, IN OUR VIEW, A RURAL BRANCH HAS TO BE ALWAYS IN RURAL AREAS AND THE PLACE REFERRED CAN EASILY BE TAKEN AS A VILLAGE. SEVERAL WARDS MAY COME W ITHIN A VILLAGE, WHETHER IT BE IN CORPORATION, MUNICIPALITY OR PANCHAYATS. THERE CAN BE NO VILLAGE IN A MUNICIPAL OR CORPORATION AREA WHERE THE POPULATION IS LESS THAN 10000. SO MUCH SO, RURAL BRANCHES ARE SUCH OF THE BRANCHES LOCATED IN A VILLAGE WHERE THE POPULATION IN THE VILLAGE AS A UNIT IS LESS THAN 10000. IT IS CLEAR FROM THE ABOVE JUDGMENT THAT THIS COURT HAD ALREADY AN OCCASION TO CONSIDER THE MEANING OF PLACE WITH REFERENCE TO ABOVE SECTION. THEREFORE, RURAL BRANCH IS A BRANCH WHICH FALLS UND ER EXPLANATION (IA) TO SECTION 36(1) (VIIA). TRIBUNAL HAD TO REVERSE THE JUDGMENT OF CIT(APPEALS) IN THE LIGHT OF THE DECISION IN LORD KRISHNA BANKS CASE (SUPRA). 12. THEN COMING TO THE CONTROVERSY WHETHER CO - OPERATIVE BANK COULD CLAIM DEDUCTION OF 10% OF THE AGGREGATE AVERAGE ADVANCES WHILE COMPUTING THE INCOME IRRESPECTIVE OF FALLING UNDER RURAL BRANCH AS PER EXPLANATION, IN ORDER TO CONSIDER A COMPANY AS A BANKING COMPANY IT MUST TRANSACT BUSINESS OF BANKING IN INDIA AS DEFINED U/S. 5(C) OF BANKING R EGULATION ACT. EXPLANATION TO SECTION 5(C) CLEARLY INDICATES WHICH ARE THE TRANSACTIONS WHICH WOULD NOT COME WITHIN THE MEANING OF BANKING BUSINESS. NON - SCHEDULE BANK MEANS A BANKING COMPANY AS DEFINED U/S. 5(C) WHICH IS NOT A SCHEDULED BANK. AS ALREADY STATED ABOVE, CO - OPERATIVE BANK CANNOT BE CONSIDERED AS A SCHEDULED BANK AS SECOND SCHEDULE TO RESERVE BANK OF INDIA ACT DOES NOT INCLUDE ANY OF THE CO - OPERATIVE BANKS. READING OF SECTION 5(C) ALONG WITH EXPLANATION, CLEARLY INDICATES THOUGH ANY COMPANY WHICH TRANSACTS BUSINESS OF BANKING IN INDIA WOULD COME WITHIN THE MEANING OF NON - SCHEDULED BANK, BY VIRTUE OF EXPLANATION (1) UNDER THIS CLAUSE SCHEDULED BANK IS EXCLUDED. SO FAR AS SUB - CLAUSE(A) OF CLAUSE (VIIA) TO SECTION 36(1), TWO TYPES OF DEDUCTIONS ARE PROVIDED TO NON - SCHEDULED BANK, A SCHEDULED BANK AND A CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY, ETC. IT IS TO BE NOTED THAT APPELLANTS/ASSESSEES ARE NOT PRIMARY AGRICULTURAL CREDIT CO - OPERATIVE SOCIETY OR OTHER KIND OF BANK SO AS TO GO OUT OF THE DEFINITION OF CO - OPERATIVE BANK UNDER SUB - CLAUSE (A) TO CLAUSE (VIIA) OF SECTION 36(1). NO DOUBT, EXPLANATION (IA) TO SECTION 36(1)(VIIA) DEFINES WHAT IS A RURAL BRANCH. IT IS WITH REFERENCE TO A PLACE AND CERTAIN NUMBER OF POPULA TION. IT REFERS TO BRANCH OF A SCHEDULED BANK OR A ITA NOS. 725 TO 728/COCH/2013 14 NON - SCHEDULED BANK. APPARENTLY, WE DO NOT FIND THE TERM CO - OPERATIVE BANK. SECTION 5(CCI) OF BANKING REGULATION ACT THOUGH HAS BROUGHT IN DEFINITION OF CO - OPERATIVE BANK, VIRTUALLY EVERY BANK WHICH IS N OT A SCHEDULED BANK WOULD FALL UNDER THE DEFINITION OF NON - SCHEDULE BANK. READING OF DEFINITION OF NON - SCHEDULE BANK ALONG WITH MEANING OF RURAL BRANCH UNDER EXPLANATION TO SECTION 36(1) OF THE ACT, CLEARLY INDICATE THAT CO - OPERATIVE BANK ALSO FALLS UNDER THE CATEGORY OF NON - SCHEDULE BANK FOR THE PURPOSE OF THIS SECTION. THEREFORE, READING OF ENTIRE SECTION 36(1)(VIIA)(A) ALONG WITH EXPLANATION WOULD MEAN TWO KINDS OF DEDUCTIONS REFERRED TO IN THE SECTION WILL BE ALLOWED TO ALL THOSE BANKS ONLY IF THEY SA TISFY THE TERMS AND CONDITIONS REFERRED TO IN THE PROVISION. 13. THEREFORE, WE ARE OF THE OPINION, AUTHORITIES BELOW WERE JUSTIFIED IN OPINING THAT BENEFIT OF DEDUCTION OF 10% OF THE AGGREGATE AVERAGE ADVANCES IS APPLICABLE TO CO - OPERATIVE BANK ALSO PROVID ED THEIR RURAL BRANCHES HAVE ADVANCED SUCH AMOUNTS. SUCH RURAL BRANCH MEANS A BRANCH AS EXPLAINED UNDER EXPLANATION (IA), AS OPINED IN THE DECISION OF LORD KRISHNA BANKS CASE (SUPRA). IN THE LIGHT OF ABOVE OBSERVATIONS AND REASONING, NONE OF THE CONTEN TIONS RAISED BY APPELLANTS ARE SUSTAINABLE. HENCE, THESE APPEALS ARE DISMISSED ANSWERING SUBSTANTIAL QUESTIONS OF LAW IN FAVOUR OF REVENUE. 10 THEREFORE, FOLLOWING THE ORDER OF THIS TRIBUNAL IN THE CASE OF PINARAYI SERVICE COOP BANK LTD, CITED S UPRA, WE ARE INCLINED TO DISMISS THIS GROUND OF THE ASSESSEE IN ALL THE APPEALS. 11 IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF OCT 2014 . SD/ - SD/ - ( N.R.S. GANESAN ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN: DATED 17 TH , OCT 201 4 RAJ* ITA NOS. 725 TO 728/COCH/2013 15 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT , 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN